Reprinted from the October 2, 1995, issue of MODERN HEALTHCARE
Copyright, Crain Communications Inc., 740 Rush Chicago, IL  60611 All rights reserved
by Sandy Lutz
Universal Health to buy Amarillo public hospital
In a surprise move, the public hospital district in Amarillo, Texas, last week agreed to sell 360-bed Northwest Texas Healthcare System to Universal Health Services, a King of Prussia, Pa.-based company.

The tax-supported hospital district had been talking to Columbia/HCA Healthcare Corp. earlier this year, then decided to put the hospital up for bids. About 10 companies expressed interest in the hospital, and last week the hospital district’s board voted to sign a letter of intent with Universal.

“We have come to the conclusion that the most economic and sensible way to maintain our mission of providing high-quality, cost-effective care to our area, including our medically indigent, is for the city to get out of the high-risk business of running a healthcare enterprise,” said Jim Simms, the board’s chairman.

Terms of the deal were not released, but they are expected to be disclosed in a couple of months when the city’s commission votes on the deal.

Northwest Texas’ earnings before interest, taxes, depreciation and amortization – a common formula called EBITDA used in valuation – were $28 million in 1994.

Hospital chains typically pay between five and seven times EBITDA, which would give an estimated purchase price of at least $140 million.

The hospital district’s decision relieves it of being both the payer and provider in healthcare, said Josh Nemzoff, president of Nemzoff & Co., negotiated the deal for the hospital district. He said district residents will no longer be paying $8.5 million a year in taxes. In addition, Universal is expected to pay taxes of about $3 million a year.

Universal, an investor-owned system, operates 31 hospitals, seven of them in Texas.

Universal also agreed to provide “hospital-based indigent care to qualified indigents that is medically necessary,” according to the agreement.

Northwest Texas provided $21.2 million in charity care in 1994.

The hospital reported net income of $13.8 million on revenues of $129 million in the fiscal year ended Sept. 30, 1994.